Ten U-turns in Consumer SpendingHave Consumers Become More Frugal? is the title of a Federal Reserve Bank of New York supplement to its third-quarter report on household debt and credit. The answer, of course, is yes. The Fed’s analysis shows that, at the macro-level, consumer spending ballooned on borrowed money in the years leading up to the Great Recession. Now, not only has the borrowing stopped, but Americans are cutting back to pay off their debts. According to the report, consumer spending fell by $150 billion in 2009.

At the household level, the Consumer Expenditure Survey shows the same pattern. Household spending peaked in 2006 at $51,688. In 2008, the average household spent $50,486, or $1,200 less after adjusting for inflation. On many categories of products and services, the average household reversed the direction of its spending in the 2006-08 time period compared with the 2000-06 time period. Here are the 10 most telling U-turns in consumer spending:

1. RESTAURANTS: +8 percent to -6 percent Average household spending on restaurants U-turned from an 8 percent gain in the 2000-06 time period to a 6 percent loss between 2006 and 2008, after adjusting for inflation. Because of the Great Recession, Americans are spending more on groceries. Even basic ingredients such as eggs, flour and milk are staging a comeback after years of decline. Don’t write restaurants off, however. They still attract the 72 percent majority of households into the marketplace on a weekly basis.

2. MORTGAGE INTEREST: +21 percent to -5 percent Every age group has been hammered by the housing bubble. But no age group has been hit as hard as 35-to-44-year-olds. Because they were in the home buying lifestage when housing prices peaked, they paid top dollar for houses and are–by far–the biggest spenders on mortgage interest. With many losing their homes, average household spending on mortgage interest is declining.

3. STATIONERY AND GIFT WRAP: +15 percent to -11 percent Is there anything more discretionary than gift wrap? Spending on this item climbed significantly during the easy money years of the housing bubble. Since 2006, not so much.

4. DAY CARE: +16 percent to -8 percent As the unemployment rate climbed, spending on day care fell.

5. FURNITURE: +1 percent to -22 percent Houses were selling furiously during the housing boom, but spending on furniture was surprisingly lackluster. Since 2006, average household spending on furniture (and appliances) has collapsed.

7. BABY CLOTHES: 0 percent to -9 percent This category had been defying the long-term decline in apparel spending as births climbed to a record high of 4.3 million in 2007. When the recession set in, the number of births began to fall, and so did spending on baby clothes.

8. DRUGS: +6 percent to -12 percent Out-of-pocket spending by the average household on drugs is down despite the barrage of advertising, the growing proportion of pill poppers in the population, and the penny-pinching of insurance companies. Behind the decline is the Medicare Prescription Drug Plan, which went into effect in 2006.

9. ADMISSIONS TO ENTERTAINMENT EVENTS: +1 percent to -5 percent During the downturn, households continued to spend on high-definition television sets. But they cut back on other entertainment categories. One loser was this category, which includes movie and amusement park tickets.

10. CASH CONTRIBUTIONS: +34 percent to -13 percent Donations to charities are plummeting, says the Chronicle of Philanthropy. The household numbers bear this out. Average household spending on contributions climbed strongly when Americans felt flush, then fell sharply as they tightened their belts.

American consumers spent $330 billion a year in borrowed dollars between 2000 and 2007, according to the Fed study. Now those dollars–and many of the businesses they built–are gone for good.
By Cheryl Russell, editorial director, New Strategist Publications. If you have questions or comments about the above editorial, contact demographics@newstrategist.com.

Well, this is a surprise. Hispanics live longer than other U.S. residents despite the fact that they are the least educated, have the lowest incomes, and are most likely to be without health insurance. The National Center for Health Statistics recently estimated, for the first time, the life expectancy of the Hispanic population. To their astonishment, the calculations showed that Hispanics live longer than blacks or non-Hispanic whites. In 2006 (the latest data available), Hispanics had a life expectancy at birth of 80.6 years. This compares with a life expectancy of 78.1 years for non-Hispanic whites and 72.9 years for non-Hispanic blacks. The actuaries are mystified.

Why the surprise? For one, because education has a strong positive correlation with life expectancy. The more educated you are, the longer you live. Studies have shown that a high school diploma adds five or six years to life expectancy. But only 63 percent of Hispanic adults have a high school diploma, far below the 83 percent of blacks and 91 percent of non-Hispanic whites. Yet Hispanics live longer.

The second reason for the surprise: Hispanics have lower incomes than blacks or non-Hispanic whites, and higher incomes are strongly correlated with a longer life expectancy. Studies show that people in the highest income groups live 4 to 10 years longer than people in the lowest income groups. Yet Hispanics live longer.

The third reason for the shock waves reverberating in the nation’s vital statistics corridors is that Hispanics are least likely to have health insurance coverage. Only 68 percent of Hispanics are insured compared with 79 percent of blacks and 88 percent of non-Hispanic whites. Yet Hispanics live longer.

To keep up-to-date on ever-changing demographics and lifestyles, check out these useful links.

The Long-Term Unemployed
In 2010, nearly 15 million Americans were unemployed, and 31 percent of them had been out of work for at least one year, according to this analysis by the Bureau of Labor Statistics. Never before have so many people been out of work for so long. Among the unemployed aged 55 or older, fully 41 percent have been out of work for at least a year. This BLS analysis examines the age, sex, race, and educational attainment of the long-term unemployed.

America’s Families and Living Arrangements
Average household size increased between 2009 and 2010, rising from 2.57 to 2.59 people per household, according to Current Population Survey data recently released by the Census Bureau. The biggest increases in household size were reported by householders under age 25 and aged 40 to 44 as unemployed young adults scrambled for shelter by moving in with one another or moving back home. The median age at first marriage also increased, rising to a record 26.1 years for women and 28.2 years for men. More statistics on living arrangements can be found at this site.

Debt of Boomers Who Are Nearing Retirement
At this site you will find an analysis by the Social Security Administration of the debt level of households nearing retirement (headed by 50-to-61-year-olds), based on data from the 2007 Survey of Consumer Finances. In 2007, 85 percent of households headed by 50-to-61-year-olds had debt, with the debtors owing a median of $83,030. Both the percentage of the age group in debt and the amount the debtors owed increased between 2004 and 2007. Because of the increase, the researchers conclude that “more recent cohorts will reach retirement age with less financial cushion than their predecessors.” And this was before the Great Recession!

Consumers are slashing their spending, making it vital to get the answers to Who buys? What do they buy? How much do they spend? And, most importantly, what will they cut as their incomes fall and expenses rise?

NEW TITLE American Buyers: Demographics of Shopping is a groundbreaking new guide to buying patterns, essential information in these difficult economic times. Its weekly and quarterly spending data show you how many households buy certain products and services and how much buyers pay for them, all broken down by age, household income, household type, race and Hispanic origin, region of residence, and education.

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The 14 volumes in the Who’s Buying Series, which can be purchased individually or as a set, give you the big picture about consumer spending by age, income, household type, race, Hispanic origin, region of residence, and education. Each volume focuses on an individual product category, ranging from apparel and beverages to restaurants, consumer electronics, and travel.

For your convenience, New Strategist’s titles are available as searchable single- and multiple-user pdfs that are linked to spreadsheets of all the data tables in each book so you can do your own analyses and create PowerPoint presentations.